If someone were to ask us what the most important things were in determining the success of a real estate investor, one of the top items on our list would be asset analysis.
You would be surprised just how many investors are out-of-touch with the actual details of their portfolios. Ultimately, this leads to unchecked risks, blind spots, and big trouble.
When a real estate investor is fully informed and aware of their portfolio, however, they can not only stop risk in its tracks, but they’re able to take a holistic approach to investing. They can craft strategies that maximize their potential, identify missing pieces, target areas of improvement, and ultimately craft that ironclad million dollar investment portfolio that we all dream of.
Sometimes, however, this piece of that puzzle can be overwhelming for real estate investors—especially those who don’t yet have years of experience to help them know what to look for in their portfolios.
Here are some tips to help you increase your net worth, decrease risk, and push you forward on your journey to a million dollar real estate portfolio.
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4 Real Estate Portfolio Assets Analysis Tips
First things first—what is asset analysis in the context of an investment portfolio? It differs from portfolio analysis, which looks more at the overall appropriateness of the portfolio for the owner in terms of composition, resources, investor needs and preferences, and whether or not the portfolio is projected to meet its goals. Asset analysis, on the other hands, looks specifically at costs, opportunities, risks, and performance. It’s a deeper dive into the actual pieces of the portfolio, including their performance and the need for them as a part of the whole.
Have a broader portfolio plan.
While asset analysis and portfolio analysis differ, it’s valuable to have them go hand-in-hand. One needs a broader portfolio plan in order for asset analysis to be effective. If you don’t know what you want out of your portfolio or for yourself, the numbers you receive from your analysis are going to be largely meaningless. What are you going to do with them?
Whether you’re sitting down with a specialist to help you analyze your portfolio, consulting with your turnkey real estate provider, or going over your portfolio on your own, having that foundation from the very beginning to set your direction and goals will help you know what you’re looking for.
Then when you get to the nitty-gritty details, the numbers you see will actually hold meaning.
Bring in the experts.
We already mentioned the value of specialists, but here is where it really counts. There are entire businesses built around investment portfolio consultation, and there is a reason for it. It’s tricky to do correctly, particularly when it comes to analyzing one’s assets. For real estate investors, however, you don’t necessarily have to go to an outside firm to have your portfolio properly evaluated.
If you are a turnkey investor, you have resources at your fingertips! In the case of Memphis Invest, we have portfolio advisers at the ready who will help you not only figure out which direction to go but will help you ensure that you are building an effective and efficient long-term portfolio that meets your investment goals.
Prioritize cash flow.
You know the saying in real estate investment: cash flow is king. When you’re looking at your assets, there are a lot of different numbers and statistics that you can get hung up on. Remember that cash flow is always priority at the end of the day. Appreciation is secondary. No matter what your long-term goals are, you always want to ensure that you’re reducing costs and risk so that in the present your cash flow is maximized and that over time, it grows.
Know where your money goes.
Last? Be an informed investor. It can be easy to hand your portfolio off to an expert, let them take care of the analysis and just do whatever it is they recommend without taking the time to think about why or seeking to understand the information you’ve been given.
A responsible, successful investor is always learning. This means that you know where your money is going—both when you’re spending and earning. You understand how your portfolio is working, whether it’s for you or against you. At the end of the day, you want to be able to make informed decisions about your portfolio, not rely on blind faith decisions, no matter how much you happen to trust the experts you are working with.
It will not only increase your peace of mind, but increase your confidence and experience as an investor, help you avoid future mistakes and undue risk, and equip you to make better investment decisions in the future.
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